Sept. 19 (Bloomberg) -- Stocks surged from London to Shanghai after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're putting together plans to halt the credit-market seizure, while U.K. and American regulators cracked down on short sellers.

Deutsche Bank AG and Credit Suisse Group climbed 15 percent while Macquarie Group Ltd., Australia's largest investment bank, soared a record 38 percent after Paulson and Bernanke proposed removing troubled assets from the balance sheets of financial companies. Barclays Plc rose 32 percent as the U.K.'s Financial Services Authority banned speculators from betting against financial shares for the rest of the year.

Europe's Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987, adding 6.4 percent to 273.20 at 10:42 a.m. in London, while the U.K.'s FTSE 100 Index also posted a record advance of 8 percent. Russia's RTS Index jumped 16 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market. Futures on the Standard & Poor's 500 Index climbed 2.8 percent, and the MSCI Asia Pacific Index rebounded 4.8 percent from a three-year low. China's CSI 300 Index increased by a record 9.3 percent.

``At the start of the week, equity investors weren't just facing a loss but an absolute loss,'' said Gary Dugan, London- based chief investment offer for Europe at Merrill Lynch Global Wealth Management, which oversees $2 trillion. ``Now what they are saying is every financial institution is virtually underwritten by this proposal to drop those assets into a life boat.''

Lehman, AIG

The MSCI World Index is still down 3.2 percent this week after Lehman Brothers Holdings Inc. filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp. More than $500 billion in credit losses and writedowns at banks have pushed the global economy toward a recession.

U.S. Treasuries and European and Japanese government bonds fell today on speculation Paulson and Bernanke's plan will increase demand for stocks over bonds. The dollar rose 1.4 percent against the yen, the most since Aug. 22.

U.S. lawmakers' plan to shore up the balance sheets of American financial companies also triggered the biggest drop in the cost of default protection on corporate bonds since the bailout of Bear Stearns Cos. in March.

Deutsche Bank, Germany's largest bank, jumped 15 percent to 57.73 euros, while Credit Suisse, Switzerland's second- largest bank, climbed 15 percent to 54.1 francs.

British Banks

HBOS Plc gained 33 percent to 230 pence, trimming its weekly decline to 19 percent. Barclays added 32 percent to 398 pence, leaving it with a 4 percent gain for the week.

The U.K. Financial Services Authority said today its ban on short selling of financial shares will apply to 29 companies including HBOS and Barclays.

Ireland's financial regulator also banned short selling of the country's banking stocks to ``ensure the orderly conduct of the market,'' following the move by its U.K. counterpart. Bank of Ireland gained 42 percent to 5.38 euros.

Macquarie, whose shares have lost half their value this year, climbed a record 38 percent to A$35.90.

Shares in China

Bank of China, the nation's second-biggest bank, jumped 10 percent to 3.36 yuan. A 24 percent slump in the month through yesterday left it valued at a record low of 10.5 times profit. Industrial & Commercial Bank of China Ltd., the country's largest, increased 9.9 percent to 3.78 yuan.

The companies' state-owned controlling shareholder will buy shares on the open market to shore up investor confidence, the official Xinhua News Agency reported.

Morgan Stanley, the second-biggest U.S. securities firm, added 63 cents to $23.18 in Germany. The U.S. Securities and Exchange Commission temporarily banned short-selling in shares of 799 financial companies to curtail the market rout.

Morgan Stanley's Chief Executive Officer John Mack told employees this week investors betting on a decline in the firm's shares are ``driving our stock down.'' The company yesterday snapped seven days of losses, rising 3.7 percent.

Goldman Sachs Group Inc., the biggest U.S. securities firm, and Morgan Stanley are seeking to avoid the sort of run on their shares that helped trigger emergency sales of Merrill and Bear Stearns, and the Sept. 15 bankruptcy by Lehman, once the fourth-biggest.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Last Updated: September 19, 2008 05:50 EDT